Stocks extend gains, S&P tops 1000 after manufacturing report

The stock market is extending its summer rally as August brings more upbeat economic data.

Reports on manufacturing and housing sent stocks soaring Monday, hurling the Standard & Poor's 500 index past 1,000 for the first time since early November. All the major indexes rose more than 1%.

The Institute for Supply Management reports that while manufacturing activity slowed during July, it did so at the slowest pace in nearly a year. The ISM says its manufacturing index rose to a better-than-expected 48.9 from 44.8 in June. A reading above 50 indicates growth.

And the Commerce Department has reported a jump in residential building during June that lifted overall construction spending for the second time in three months. The report provided new evidence that the housing sector may be recovering.

Stocks were already rising before the reports, after gains in overseas markets feed the recent momentum on Wall Street that gave the market its best July in 20 years. World markets mostly rose as surveys in China and Europe showed manufacturing activity is improving.

Positive reports on the European banking sector added to the day's upbeat news.

Barclays said its first-half net profit increased 10% on stronger earnings from its investment banking division. Still, losses from bad loans rose as consumers in both the U.S. and Britain had trouble repaying debt.

In other signs of investors' growing confidence, safe-haven assets like Treasurys and the U.S. dollar are falling, while oil and other commodities prices are rising.

The major indicators begin the first trading day of August at their highest levels since the fall. The benchmark Standard & Poor's 500 index is just 13 points shy of the 1,000 level, a point it hasn't closed above since early November.

Stocks surged last month, reigniting a spring rally that had fizzled in June amid growing doubts that the economy was on solid footing. Stocks regained momentum as an increasing number of economic and corporate earnings reports suggested investors' bets had been well-founded.

The reports have shown that companies aren't losing money at the rapid pace they were last fall and earlier this year. Though there are concerns that the aggressive cost-cutting measures businesses have undertaken to boost profits are not sustainable, several upbeat outlooks from companies like IntelINTC and CaterpillarCAT suggest business conditions are indeed improving.

Overseas, Hong Kong's Hang Seng index rose 1.1%, while Japan's Nikkei stock average slipped 0.04%. In afternoon trading, Britain's FTSE 100 rose 1.6%, Germany's DAX index rose 1.7%, and France's CAC-40 was up 1.5%.

Among the earnings news in the U.S., health insurer HumanaHUM said its second-quarter profit rose 34% on higher premiums. Tyson FoodsTSN, said its quarterly profit soared on solid chicken sales.

Later in the day, following the close of trading, reports from homebuilders Centex CTX and Pulte HomesPHM will be closely watched. The battered housing sector has shown some recent signs of healing.

Despite the recent gains in stocks, there are still potential pitfalls to the market's optimism, namely the closely-watched monthly employment report on Friday.

There is also concern that rising commodity prices and interest rates could outpace the economy's recovery.

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